FSA demands new legal powers after Libor manipulation scandal

The Financial Services Authority is proposing tough new powers to tackle
banking malpractice in the wake of the Libor-rigging scandal.

The FSA's proposals come as Martin Wheatley, the chief executive-designate of the Financial Conduct Authority, is expected to propose a fundamental overhaul of the way the inter-bank lending rate is set when his government-commissioned review reports this week.Photo: PA

By Tom Rowley

9:30PM BST 22 Sep 2012

The watchdog has called for "exemplary sanctions" and "forceful punishment" of bankers who are caught breaching regulations to make them an example in an industry where investigating malpractice is difficult.

The individuals who set Libor could also come under the regulatory umbrella.

The FSA's proposals come as Martin Wheatley, the chief executive-designate of the Financial Conduct Authority, is expected to propose a fundamental overhaul of the way the inter-bank lending rate is set when his government-commissioned review reports this week.

In submissions to the Parliamentary Commission on Banking Standards, the FSA suggests exercising an appointment power over bankers whose information helps to calculate Libor, by adding them to its "approved person" register.

The agency would assess whether they were "fit and proper" people who had "honesty, integrity and reputation" before they took the role.

Bob Diamond, the bank's chief executive, and Marcus Agius, its chairman, both resigned over the scandal. Jerry del Missier, its chief operating officer, also left the bank, although no findings had been made against any of the three.

In a report on the issue, the Treasury Select Committee criticised Mr Diamond's evidence in its hearings on Libor, saying it "fell well short of the standard that Parliament expects, particularly from such an experienced and senior witness".

Mr Diamond has made it clear that he believes his evidence to the committee was accurate.

Regulators have said they were also investigating 16 other banks over rigging.